Partial Plan Termination - No Account Balance

[Vlad401k]

A plan has a Partial Plan Termination in 2025. None of the terminated participants have a balance. Should the terminated participants be 100% vested (in case they are re-hired in the future) or not (since they don't have an account balance at time of termination)?

 

Thanks.

[Paul I]

Look in Revenue Ruling 2007-43 regarding partial plan terminations and you will find this language:

"If a partial termination occurs on account of turnover during an applicable period, all participating employees who had a severance from employment during the period must be fully vested in their accrued benefits, to the extent funded on that date, or in the amounts credited to their accounts."

Based on this language, if a not-fully-vested employee was terminated as result of a partial plan termination, the employee would be considered 100% vested in their accrued benefit at that time.  If this former employee subsequently is rehired, then their vesting percentage in any new accrued benefits would be determined using the vesting crediting rules of the plan document.  The full vesting due to the partial plan termination does extend to or supersede the plan's vesting rules applicable to the new accrued benefits.

I have not seen anything that support grandfather the full vesting due to the partial plan termination.